PRESIDENT STRESSES ON RURAL INDIA DEVELOPMENT, HEALTH AND EDUCATION IN HIS PRE BUDGET SPEECH
During his speech, which marked the inauguration of budget session, the president APJ Abdul Kalam promised a New deal for rural India. He assured that the government will take appropriate measures to ensure pacing of Investment in agriculture, public investment in irrigation, and provision of single market for agri-produce. He further stated that government has taken procedures which has steeply increased flow of credit in agriculture. The UPA Government's commitment to protect farmers from adversaries of nature has given rise to farm insurance scheme. Covering only rabi crops initially it now covers kharif crops also, the President said. Besides, the government will take measures for the modernization of meteorological department so that more accurate information can be made available to the farmers.
Horticulture is another area on the government's priority list and government will launch a National Horticulture mission soon. The president emphasized upon the crucial issue of water availability and urged people to adopt a holistic and nationalistic view in managing water resources. He said that the investment under wage employment programme will provide more funds for the irrigation programme and the existing policies will complement it. New schemes to promote micro irrigation will be started. The president stressed that private-public partnership is of utmost importance in order to develop rural infrastructure.
Another key area is the research in agriculture, for which Kalam said, funding has considerably increased in the past few years. New deal requires revitalization of rural India. UPA government has formed a new ministry for panchayati raj, which has its 150-point action plan for the development of rural India. National committee on rural infrastructure promises to provide electricity to all villages by 2009. This will substantially reduce distress migration to urban areas. Another priority the president outlined wass rural health care and education
He said the employment opportunities will grow simultaneously with the growth in agriculture, industry service and infrastructure. National employment guarantee bill, which gives guarantee to rural poor for 100 days of employment, will be further improved to cover all rural areas. Food for work scheme has successfully covered 50 lakh additional families from its commencement raising the total to 2 crores families in rural India.
India needs investment in education at all levels from elementary primary education to world class research institutes. Sarv shiksha abhiyaan, nutrition for adolescent girls and launch of DD direct home technology has been successful in imparting education to SCs and STs and other backward communities of India. University of Allahabad and University of Manipur have already been given national university status. Government will set up a National Knowledge Commission to develop science and technology. Kalam pointed out at the need of public-private partnership in this regard.
In the sphere of health care, the government has decided to augment the expenditure from 0.9% of GDP to 2% of GDP. This increase will be primarily in the realm of primary health service esp. in the rural areas.
Further, emphasizing on the need for stepping up progress made in core sectors, he said the government has recognized the need to boost urban infrastructure as 1/3 of the population lives in urban areas. For economy to grow at 7-8% massive investment in infrastructure such as roadways, waterways, aviation, housing is needed. The president pointed out that India needs at least $150 billion to catch up with its East Asian counterparts. He said the new civil aviation policy would draft measures for modernization of the aviation sector and offering consumers a wider choice. Also there is a need for granting greater autonomy to National Highway authority of India. Golden quadrilateral has speeded up and the focus is on improving railroad network in north east. In telecom sector, the Broadband policy announced in November 2004 aims at increasing more Internet connectivity with higher speed, the president emphasized on bridging the digital divide between rural and urban population. He further stated the urgent need for an access to energy security. India must give priority to harnessing alternative sources of energy.
Modernization and development of manufacturing and service sector is crucial for growth. The president expressed his concern over the decline in manufacturing growth rate. In this regard he said, priority must be given to industries at home like pharma, leather and textiles.
End of MFA open a new opportunity in the Indian textile sector and the government will take all the steps to increase investment and textile, Kalam Said. Handloom sector modernization is among the key priorities of the government with special attention to the Indian weavers. The government has promised of making the coming two years as the years for weavers, with special attention given to access to technology, credit and market.
The biggest challenge in manufacturing sector is to promote 'Brand India' label. Recognizing the fact that 90% of the country's labour force is employed in informal sector, he said that the government will appoint a national commission for small and tiny enterprises and self employed persons so that informal sectors blossoms.
For rebuilding rural India 'Bharat Nirmaan' programme would be set up which would serve as a platform for electricity, water and telecom connectivity for viallges. "Until our citizens living in rural India, especially the farmers and the weaker sections, are economically and socially empowered, India cannot shine," Kalam said adding, "my government wants India to shine, but it must shine for all."
My government is committed to reining in the rate of inflation as it hurts the poor the most," he said adding the economy is once again poised to record close to seven per cent in 2004-05 despite a weaker monsoon and higher oil prices.
FDI IN REAL ESTATE GETS CABINET'S APPROVAL
The Cabinet Committee on Economic Affairs eases up rules for foreign investment in the real estate and construction sector, a senior industry ministry official said on Thursday 24th Feb.
This will boost the reform process in India's financial sector and deepen the liberalization process, which kicked off in 1991 when the country embraced free market reforms.
Construction stocks poured as the Cabinet gave in-principle clearance to foreign direct investment in real estate, reported TV channels. To start with, the 100-acre criterion for FDI in realty has been removed.
The government will soon announce its decision on modifying FDI norms in construction sector to make them more construction-centric rather than land-centric.
GOVERNMENT PONDERS OVER FDI IN RETAIL
Commerce and Industry Minister Kamal Nath has said that the cabinet will discuss in detail the issue of allowing foreign direct investment (FDI) in retailing before taking any such decision. Nath said this while addressing a seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) on Thursday,Feb 24.
"The nature of the retail sector is too complex for a hasty decision.... Only 2 per cent of the business is in the organised sector and of the remaining 98 per cent, 50 per cent is subsistence retailing," the minister said
The turnover of the retail sector was estimated at Rs 400,000 crore. He also said that experience had suggested that large retail chains had created monopolies in the sourcing business.
Nath further said that Wal Mart had proposed assured sourcing of billions from India in return for setting up chains in the country but he had turned down the idea.
"We are very clear that if at all FDI is permitted in retail trade, it should lead to incremental economic benefits and not substitute the on-going activities. There is no question of replacing or displacing what we already have. It must add to economic activity," Nath said.
"This whole fixation of permitting or not permitting FDI in the retail sector is, in my opinion misplaced. FDI is not an end in itself but a means towards the end," he added.
He also outlined the advantages of allowing foreign investment in the sector saying the focus should be on sectors like food processing where it can fuel growth and bring technology.
"We are looking at it with a great sense of urgency. If we look at the food sector, it is the most compelling reason as 40 per cent of our fruits and vegetables rot due to lack of processing facilities. Should we not give this priority," he said.
Nath, however, did not give a timeframe as to when the views would be firmed up.
PUBLIC OFFERING ROUTE JUDICIOUS FOR DISINVESTMENT SAY EXPERTS
The United Progressive Alliance Government is not expected to go for entire sale of public sector companies to the private sector and would instead tap the public offering route to divest its equity.
"Politically, it will be difficult for the Government to surrender management control of the public sector companies by selling off its equity to any strategic investor," said chief economist of India's leading independent credit rating firm CRISIL Ltd, Subir Gokarn "So the public offering is the only route by which the Government can sell some shares to raise revenues without giving up control. I think this option will keep the disinvestments programme alive."
"The Government's stake may go below 50 per cent in very rare cases. The divestment exercise will not go the full length of government taking its hands out of the affairs of public sector companies," he added.
Experts say the Government will have to push ahead aggressively with economic reforms, including privatisation of state-run firms, to bring down fiscal deficit to sharply lower levels.
Some of the public sector units that are likely to float public offerings to reduce Government's stake include Power Finance Corp, Power Grid, Shipping Corp of India, National Hydro Electric Corp and Engineers India.
Unlisted companies like the domestic aviation major Indian Airlines and the national flag carrier Air-India may also tap the stock market to raise resources to compete with the more resourceful private companies.
In its Common Minimum Programme (CMP) for governance released soon after coming to power in May 2004, the United Progressive Alliance had said public sector companies would be encouraged to enter the capital market to raise resources.
BUDGET MAY BRING GOOD NEWS TO SAVERS WITH INFLATION PROOF BOND
The government is planning to issue a bond that will offer investors a fixed return above the prevailing rate of inflation whatever the inflation rate is. Finance minister P Chidambaram is expected to make the announcement on the budget day.
This instrument will protect savers from the pinch of falling interest rates and rising prices. In the past few months, returns on existing bonds were seen to be turning negative in real terms.
The new, inflation-proof bond will have tenure of 5 years, with returns fixed at 2 percentage points above prevailing inflation. It will, however, not carry any tax concessions. For someone whose income falls in the highest tax bracket of 30 per cent, the real post-tax return from the bond would be around 1.4 per cent only. The tax will be deducted only on the 2 per cent offered over the inflation rate.
To offset the impact of inflation, the principal will be indexed against inflation every year. When the bond matures, you'll get your principal back, along with the inflation-proof return. This will be good news to the savers. Today, the RBI bond offers a taxable return of 8 per cent, but after paying tax at 30 per cent, the net return is 5.60 per cent. With inflation at 5 per cent, you make a paltry 60 paise on every Rs 100 invested. You could even end up losing money if inflation soars above 5 per cent, which has happened over the last year. The new bond will likely to have a nominal return at the rate of 6-7 % given the expected rate on inflation of 5%.
VAT FACES SEVERE PROTEST FROM TRADERS; SOME STATES DRAGGING THEIR FEET
Traders have staged nationwide demonstrations against the Value-Added Tax, which is to be implemented by all states from April 1, 2005. Traders associations, led by the Confederation of All India Traders, staged demonstrations with an anti-VAT picture carrying message of the adverse impact of VAT, CAIT secretary general Praveen Khandelwal told PTI after initiating the demonstration at New Delhi's prime shopping centre Palika Bazaar. He said demonstrations against VAT were being held all over India.
The traders have also threatened to go on a hunger strike on March 17 if their demands of making VAT trader-friendly were not met, he said. The traders will also launch a "VAT-RATHYATRA" on March 1 all over the nation to protest against the "harsh" clauses in the VAT White Paper, he added.
VAT if fully implemented across all states in India, would be the biggest tax reform in the last 50 years. But now the April 1 deadline looks in peril as many states have begun to make noises that they would not be able to implement VAT from April 1 2005. It is believed that unless all the states introduce VAT together, those who switch over to VAT would suffer. UP has made it clear that it won't implement VAT from April 1. Similarly other states like MP, Gujarat, Rajasthan, Karnataka and Uttarnchal are under tremendous pressure from the strong traders' lobby which doesn't' want the change over.
INDIA-PAK BEGINS TALKS ON ECONOMIC COPPERATION
Now when India and Pakistan have begun trade talks that could lead to a free trade pact on Tuesday, 22nd Feb, it is seen as a preparatory ground for building roadmap for economic cooperation between the two nations.
"It is a historic step in our relations," Commerce Minister Kamal Nath said, opening the first meeting of a group of top trade officials from both countries set up to During their talks on Tuesday and Wednesday in New Delhi, the officials will discuss policies to help Indian and Pakistani companies do more business with each other, Nath said.
A bilateral free trade pact on goods will be discussed, along with other deals on trade in services and cross-border investment, he said. "I hope the first meeting will kick off much more than what we have expected."
Business leaders have long said there is vast potential to expand commercial ties between India and Pakistan, home to a total of some 1.2 billion people.
Official trade between India and Pakistan has averaged around US$300 million annually in the past decade, less than 0.2 percent of what the two countries trade with the rest of the world.
"I won't be ambitious if I say we should aim to increase bilateral trade five times in a couple of years," Nath said.
Nath said a priority for the Joint Study Group would be to identify such goods that are banned from being traded between India and Pakistan, and are sourced from a third country. For example, thousands of Indian-made cars find their way to Pakistan through Dubai, because Islamabad does not allow auto imports from India. Pakistanis pay three times the price Indians pay for the same car.
Such third-country trading and cross-border smuggling, resulting from barriers to trade between the two countries, total nearly US$2 billion (euro1.5 billion) each year, analysts say.
The rivalry between India and Pakistan has also delayed creation of a free trade zone in South Asia, which also includes Bangladesh, Nepal, Bhutan, Sri Lanka and the Maldives and is home to nearly half of the world's poor population living on less than a dollar a day.
Last year, the seven South Asian nations agreed on Jan 1, 2006, as the deadline to start cutting barriers to trade within the region. Progress in trade negotiations between India and Pakistan is crucial to meeting that deadline.
"I don't see why we can't move forward," Nath said. "Trade between India and Pakistan is going to be the engine of growth for both countries."
RED CHILLI CONTROVERSY-WHO WILL TAKE THE BLAME?
In the wake of pressure on food makers to more frequently track ingredients for contaminants, UK's food supervisory body on Friday pulls over 350 food products from the shelves after detecting the illegal ingredient red food dye Sudan I. UK has given its message from the Food and Drink Federation (FDF), which represents the UK's largest manufacturing sector that long-term "trusted" suppliers (notably Indian companies) of the contaminated chilli powder are to blame because tests are not routinely conducted for the banned dye SUDAN-1.
According to experts many established spice exporters to the UK might face the chop unless they demonstrably cleaned up their act. The FDF's comments are considered significant because it represents key British players of an industry that exports nearly £ 10 billion of food and drink worldwide.
Believed to cause cancer if consumed in large enough quantities, Sudan I - IV is a forbidden colour under the Colours in Food Regulations 1995. In January 2004 a European Commission clampdown extended the rules on the illegal red chemical dyes to include curry powder. SUDAN-1 has been illegal in Britain for a decade but the contaminated, three-year-old Indian import is thought to be the first conclusive proof that
Indian spice suppliers have continued to break the rules. However, spice players in India have put the blame on the british customs authoprities for allowing imports of chillis without the mandatory labelling. The officials of the spice board said that their product is unlikely to be contaminated. And according to them it is worthless to talk about the use of colouring agents; since October 2003, not a single consignment left India with SUDAN-I coloured chillis. The licences of the three culprits - all Mumbai-based companies - were suspended in June 2003, and have not been renewed. These companies are Gautam Export Corp, Patons Export and Volga Spices and Masala Mix Ltd.
According to the Indian Spice board, an estimated 500,000 tonnes of spices and herbs valued at €1.2 billion are traded each year around the globe - of which 46 per cent is supplied by India. It appears that Premier Foods received the chilli powder that was the source of the contamination before July 2003 when regulations required that food be tested for the substance. However, commerce minister Kamal Nath has asked for a report on export of chillis sent from India to Britain.
DELHI GETS 'KISAN HAAT' FOR DIRECT AGRI BUYING AND SELLING
Enabling farmers to sell their produce directly to consumers in the national capital, a `kisan haat' will be inaugurated here tomorrow. Chief Minister Sheila Dikshit will inaugurate the sprawling haat, built over an area of 9000 sq yards near Andheria More in South Delhi.
"The kisan haat's main objective is to eliminate the role of commission agents as they do not give the farmers a fair deal in the mandis," said Delhi Food and Supplies Minister Rajkumar Chauhan. "It will also benefit the consumers as they will get fresh vegetables and fruits at reasonable prices," he added.
Delhi government a year ago approved the Rs three crore project. The market will have nearly 99 small shops, four big ones and a restaurant with all the modern facilities, the Minister informed.
"If the concept succeeds, the goverment will open more such haats in the city and possibly extend this one," Chauhan said.
44 PSUs UNDER DISINVESTMENT LIST; MORE TO BE ADDED SOON
The Left's protests have not weakened government's enthusiasm for reforms, particularly dis-investment. The government has already identified 44 companies, where it wants to partially offload equity, and the process may gain momentum post Budget session.
PSUs like NTPC, National Mineral Development Corporation, Neyveli lignite, Ircon, MMTC and Scooters India are first in the disinvestments list as these have full government ownership.
Until the pressure from the Left parties, the government had hoped to raise resources to the tune of Rs 2,400 crore this year from the divestment of stake in Maruti and Bhel. While a 10% stake sale was proposed in Bhel, in Maruti it was proposed to be 7.5%.
The government is aware of the Left's view, and has emphasised that the objective was not to privatise the PSUs, but raise resources for development projects. At a follow-up meeting earlier this month after the Bhel and Maruti decisions were put off on January 27, government managers told Left leaders that offloading partial equity would strengthen the companies, as it would provide it with funds for enlivenment.
INFLATION RATE SLIDES FURTHER
The dip in prices continues as the weekly wholesale price index (WPI) eased to 5.01% for the week ended February 5, down 0.24 percentage points from the previous week's level of 5.25%. This is the lowest inflation level achieved under the present government. The rate was 6.15% a year ago.
The consecutive fall in the inflation rate for the tenth week, has been helped by cheaper vegetable prices, fruits and edible oils, while prices of manufactured products have not changed. The onset of the harvest season has enhanced the flow of vegetables and food grains to the markets.
As per the weekly inflation data released by the government on Friday, the PI index is now at 188.6, just 0.01% over the past week's level. The index was at 179.6 points a year ago.
The sharp fall in the overall inflation rate for the economy is despite a rise in the index for fuel, power, light and lubricants' group by 0.3% to 288.9 points due to a 10% rise in the prices of aviation turbine fuel, furnace oil and naphtha.
The index for manufactured products' group was unchanged at the previous week's level of 167.5. The index for the textiles group fell by 0.5% to 132 points as synthetic and cotton yarns became cheaper. There was a decline in the prices of other cotton yarn, and cotton yarn-cones. The index for chemicals and chemical products' group was up 0.1% at 184.1 points due to an increase in prices of caustic soda and methanol and NPK contents.